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How to Sell Your Home Without Moving Out

If you are a homeowner aged 65 or older or have a parent or loved one who is a “senior,” there is a way for you to sell your home and utilize some of the equity while continuing to reside there. Reverse mortgages are an option and were quite popular for a time until the government made the qualification requirements much more stringent. However, now applicants for a reverse mortgage (generally seniors with substantial equity in their home) must show sufficient assets to cover the real estate taxes and other costs associated with maintaining their home in order to qualify for the reverse mortgage. As a result of these requirements, some companies are now offering an alternative way for senior homeowners with equity in their homes to sell them and continue to reside there rent free for the rest of their lives.

This concept is not new. It is apparently quite common for a senior homeowner in certain European countries to sell his or her home for a reduced price and retain a “life estate” in the property. The idea is simple – the senior property owner sells it to a third party for a below-market price and gets to reside there for the balance of his or her life (the life estate) free of charge. Alternatively, the senior can sell the home without retaining the life estate and rent it back from the purchaser at a reasonable rent. Under either option, the senior receives a payment equal to some reduced amount of the value of the home thereby providing him or her with some additional cash to live on.

The price paid for the home is generally established based upon the age of the owner and the value of the home. Note that a party who chooses to sell without retaining the life estate and then rents it back presumably receives a larger percentage of the value at the time of the sale than a party who sells but keeps a life estate. In addition, it appears that each of these options can be structured with the senior receiving an additional incentive payment if he or she chooses to vacate the home at some point.

The main benefit of these arrangements to the senior is that he or she no longer has to pay the seemingly ever increasing real estate taxes or maintenance costs for the property as the new owner is responsible for doing so. This can help seniors remain in their homes longer after retirement. However, the senior presumably will still have to pay for gas, electric, cable, telephone, etc. as any other tenant would be required to do.

This type of transaction may become more popular with Americans living longer and with the cost of home ownership becoming less manageable for those on a fixed income given the generally rising cost of things. Indeed, more than 75% of people over the age of 65 own their homes and a large percentage of these own their homes free and clear of a mortgage, allowing them to sell it at a reduced price in exchange for the right to spend the rest of their life there at relatively little expense. The purchaser is gambling that the seller will either not live long enough to make it a bad deal or decide (or be forced for health reasons) to relocate from the home.

When you sell your home in this way comes there are certain disadvantages to the senior and his or her heirs and should not be undertaken without speaking to a qualified attorney. If you would like to review whether this option would work for you or your loved ones, please contact one of our real estate attorneys.

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